We have seen above that a general rule, until property in the goods passes to the buyer the goods remain at the seller’s risk. When the property is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not. Therefore as a general rule, ‘risk prima facie’ passes with the property. When delivery of goods is FOR at place of dispatch, property in the goods together with the risk passes from consigner to consignee as soon as goods are loaded at place of dispatch. Consignor is not liable for short delivery of the goods.
Exceptions to the general rule “Risk follows Ownership”:
The following are the exceptions:
1) Where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault;
2) Where parties agree that the risk will pass at a time different from the time when ownership passes.
Transfer of Title (Sec 27 – 30):
Where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title than the seller had (Sec 27). As a general rule, no one can sell the goods and give a good title thereof unless he is the owner thereof. This general rule is expressed by the maxim: “Nemo dat quod non habet” which means “no one can give that which he possess not”. The seller cannot give to the buyer of the goods a better title to the goods than he himself has.
A sells goods to B acquired by theft, C a real owner of the goods finds goods in possession of B. Now B has no title to the goods as A was not the owner and had no title to sell the goods. Therefore, B will return the goods to C, the real owner.
In the following instances the buyer does not obtain a better title:
1) Person who has bought the goods under hire purchase agreement sells them;
2) In an auction sale if stolen goods are sold, neither the auctioneer nor the buyer has knowledge that the goods are stolen.
Exceptions to the general rule: Sale by non-owners:
To the general rule that no one can pass or transfer a better title than he himself possesses are the following important exceptions:
Title by estoppel: (Sec 27) Where the owner of the goods by his words or conduct or by an act or omission causes the buyer to believe that the seller has the authority to sell the goods and induces the buyer to buy them, he cannot afterwards set up sellers’ want of title or authority to sell. He shall be estopped or precluded from delaying the authority of the seller to sell.
A is owner of certain goods but he behaves in such a manner as to lead to believe that C, is the owner of those goods, or has A’s authority to sell them. Consequently, B buys the goods from C. Here A is precluded or estopped by his conduct from disputing B’s title to the goods.
A mercantile agent is defined as an agent who, in the customary course of his business, has such agent, authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to buy goods, or to raise money on the security of goods.
Where a mercantile agent is, with the consent of the owner, in possession of the goods or of documents of title to the goods, any sale made by him when acting in the ordinary course of the business of a mercantile agent shall be binding on the owner and be as valid as if he were expressly authorized by the owner of the goods to make the same provided that:
(1) the buyer acts in good faith;
(2) he has no notice at the time of the contract of sale that the seller has no authority to sell
1) The agent is in possession of the goods or of the document of title to the goods
2) He is in possession of the goods as mercantile agent with the consent of the owner;
3) The agent sells the goods in the ordinary course of his business as a mercantile agent;
4) The buyer acts in good faith
5) The buyer has no notice at the time of contract of sale that the agent has no authority to sell.